Editorial: State officials must review and revise greenbelt law

Preserving family farms and combating sprawl are worthy public policy goals, but Tennessee's so-called "greenbelt law" is riddled with loopholes that provide tax shelters for some of the state's wealthiest residents and appears to be ineffective in curbing the development of rural and suburban land.

State officials — beginning with Gov. Bill Haslam, Senate Speaker Ron Ramsey and House Speaker Beth Harwell — need to conduct a comprehensive review of the law to gauge its effectiveness, refine its aims and end frivolous subsidies that are costing Tennesseans millions of dollars each year.

The Agricultural, Forest and Open Space Land Act, passed in 1976, was designed primarily to keep farmers from being forced off their land by rising property tax rates caused by encroaching development. More than half the land in Tennessee — nearly 15 million acres — is covered under the law, which can slash property taxes by 90 percent or more, according to a series of articles published last week in the Commercial Appeal and the News Sentinel.

The law allows property assessors to grant greenbelt status to applicants who own at least 15 acres of farmland or forest, or at least three acres of open space. Farmers have to gross at least $1,500 a year over three years to qualify, and owners of woodlands have to supply a management plan. The land is assessed based on its use, not its market value. If the land is developed, a "rollback" tax is levied equal to three years' worth of the tax break, but no interest is charged.

Assessors, however, vary widely in how they approach applications and verify land use. Unlike development incentives such as tax-increment financing, there is no legislative check on an assessor's decision.

Some of the situations uncovered in the newspapers' investigation are outrageous — manicured, multimillion-dollar estates that qualify because of a hayfield tucked in a corner and woodlands "managed" under plans that essentially amount to letting the trees grow. In Knox County, a development called Beacon Park off Northshore Drive received greenbelt designation in 2011 and a $78,000 annual tax break, the largest in the county, even after the owner, Schaad Companies, submitted a 385-lot subdivision plan for the site. Cherokee and Holston Hills country clubs have enjoyed the subsidies as "open space" for nearly three decades.

The tax breaks cost local governments dearly — as much as 20 percent of the tax base in some counties — and residents and business owners who don't get the exemptions must pay more. That is why state officials must shore up the law.

First, officials should review the law to see where it works and where it doesn't. Many of the questionable tax breaks found by the newspapers occur in urban or suburban areas, a sign that the law does not reduce sprawl. A 2004 study already has shown that the law as written is ineffective in protecting forests from development. An updated, comprehensive review of the law's effectiveness is in order.

Another report, by the Tennessee Advisory Commission on Intergovernmental Relations, offers some solutions. Among the recommendations are excluding landowners who do not derive a significant portion of their livelihoods from the program, limiting the amount of the subsidies and modifying the rollback tax calculations to include interest. Other strategies, such as limiting the land eligible for the tax break to the acreage used for farming or forestry or promoting conservation easements to stave off sprawl, are worth consideration.

Tennessee's farms are vital to the state — agriculture generates $20 billion a year and employs more than 200,000 people — and providing incentives to farmers to preserve farmland has its merits, but dubious tax breaks for land speculators and wealthy hobbyist farmers must end.